Companies Engaging a Wider Variety of Lawyers and Law Firms to Handle their Disputes, Survey Reveals
Norton Rose recently published the results of its 2017 litigation trends annual survey, which highlighted several trends that underscore the importance of managing disputes economically.
The majority of companies continue to use alternative fee arrangements (“AFAs”) with outside counsel. Fifty-six percent of respondents use AFAs, and these arrangements comprise 28% of overall litigation spending. The most common AFA is fixed-fee (77%), with capped fee (53%) and blended rates (42%) falling closely behind. Notably, 96% of the companies that utilize AFAs report being satisfied with the work provided under those arrangements.
As companies continue to seek out AFAs, law firms using litigation finance to offer pricing solutions that create value for clients are positioning themselves to benefit from the trend. In fact, the adoption of litigation finance may explain why companies are hiring a wider variety of lawyers and law firms to handle their disputes. Only 9% of respondents said they plan to consolidate their legal disputes with existing outside attorneys, while 26% of the companies will expand the number of law firms they employ. As discussed recently here, one benefit companies experience from using litigation funding is the ability to hire lawyers they otherwise could not afford. It also alleviates the billable-hour model challenge of misaligned incentives between lawyers and clients. With litigation funding, both parties can reap the benefits of hybrid, fixed fee, or capped fee arrangements with measured, reasonable risk.
The survey also shows that companies are devoting more funds as a percentage of revenue to dispute resolution, allocating nearly 60% of their litigation budgets to outside counsel, while only spending 30% in-house. With these trends sticking, companies may find themselves with fewer resources to grow their businesses, launch new products, or expand services. Traditionally, each dollar spent on litigation is one less dollar spent on research and development, a new hire, or capital improvements. However, using nonrecourse litigation finance to cover outside counsel costs allows companies to pursue claims without diverting cash away from their business or seeing a negative impact on their balance sheet.
At a time when companies are seeing a rise in contract disputes, which continue to be the most common form of commercial disputes they face, it’s important for in-house legal teams and outside counsel to understand the options made possible by using commercial litigation funding. To learn more about how it works, contact us for a consultation.